Virtual shops vs. bricks – some spacial implications?

With a 2012 anticipated 13.2% share of all UK retail trade, and growing at 14%, in a flat-line market, online retail has to represent an unforeseen alternative to ‘real’ retail space. In other words, given the relatively slow reaction of retail space development to market demand, it could be said that UK retail space is already 13.2% over capacity, in that online is taking 13.2% of all retail sales. Moreover this situation will get worse as online grows, especially as online can react ‘instantly’ to market demand, scaling up at relatively little incremental cost…

The real space requirement:
In addition, as shops become more efficient, generating increased revenue per sq.ft., coupled with suppliers’ increased distribution efficiency (smaller quantities delivered more often = increased availability, 100%, zero-defect), adding store-level assortment, matched to local need, it can be seen that even less physical retail space will be required.

Buying time:
This means that major retailers will attempt to diversify even more to buy time, as they slowly readjust to market demand in terms of reducing their physical space i.e. sell off redundant shops, whilst taking some comfort in the growth of their online business, without fully appreciating the cannibalistic element…
Besides which, with Amazon at 50% of all online, no one can rest easy…

Supplier action:

• Suppliers need to reassess brands in terms of their bricks vs. online balance vs. real demand
• Where physical in-store presence is required, the brand will need focused support and performance-based-reward to justify its footprint
• Where shoppers need to handle the brand, suppliers will have to make case for purposeful ‘show-rooming’ and reward the retailer appropriately
• Suppliers need to drive store redundancy via 100% zero-defect supply, and optimise space productivity until a level of retail space is achieved that is more in line with market realities

All else is detail…